Big box bust: Fall will be painful for specialty outdoor retail, experts say

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Winter 2014/2015 was a great season.

Huge storms and record-breaking cold were a boon for outdoor stores that sold massive amounts of gear and apparel for snow sports and cold weather. But the season also gave a dangerous amount of confidence to big-box chains that over-ordered for the 2015/2016 season, and may have been the final push toward to bankruptcy.

In the short term, the big-box bankruptcies and liquidation sales that flood the market with dirt-cheap goods will be bad for independent shops and brands big and small alike. Retail shops must steel themselves against a new promotional environment this fall, says Wes Allen, president of Grassroots Outdoor Alliance. But in a few years, the retail landscape could totally change – in favor of small, specialty retail.

“In the long term, it’s going to be a positive,” Allen said. “There will be fewer big box competitors out there, and hopefully brands will learn to stick with the companies that brought them to the dance.”

While a single bad winter isn’t enough to take down some of the country’s biggest and most well-known chains, it’s certainly enough to push a struggling company over the edge. That seems to be the case for Sports Authority and Vestis Retail Group, owner of Eastern Mountain Sports and Sport Chalet, said Joe Butler, a GOA board member and president of Black Creek Outfitters in Jacksonville, Florida.

“I think weather was the exacerbating factor that made that number of them happen all at the same time,” he said. “I think there were already some that were being poorly run, that there was this one more bad thing (that pushed them over the edge).”

Sports Authority will close at least 140 stores. Photo: Wikimedia Commons.

Sports Authority will close at least 140 stores. Photo: Wikimedia Commons.

Sports Authority will auction some of its leases and assets today, and has announced plans to close nearly 150 stores. The Denver Broncos, which play at Sports Authority Field at Mile High, are trying to prevent the chain from selling its sponsorship rights to the highest bidder, according to the Denver Post. If Sports Authority recoups less money from selling its assets, the brands it owes could ultimately feel that pain. Unsecured creditors – the brands, in this case – share what’s left after secured creditors, like banks, get their cut.

Last month, Eastern Mountain Sports, Sport Chalet, Bob’s Stores and parent Vestis all declared bankruptcy. Sport Chalet will go out of business entirely, and eight EMS stores will close, as well.

Cabela’s, too, is up for sale, and the slightly-larger Bass Pro Shop Shops has reportedly teamed up with Goldman Sachs to make a bid.

The liquidation sales have already started, but it’s going to get worse. Fall product ordered months ago by the failing big boxes will arrive soon, if it hasn’t already, and there’s no place for it to go. Brands will have to dump huge amounts of gear and apparel at rock-bottom prices.

Everything is on sale at Sports Authority, according to this week's flyer for the Boulder, Colo., area. Screenshot taken May 16, 2016.

Everything is on sale at Sports Authority, according to this week's flyer for the Boulder, Colo., area. Screenshot taken May 16, 2016.

“I’d like to tell you that I think it’s going to get better, but I think it’s going to get way worse before it gets better,” Butler said. “I think we’ll start to see the descent right now. … We’re not selling any of those things at full price (that EMS and Sport Chalet have discounted) because we do a price match in store.”

Changing the retail landscape

The massive amounts of money that these bankrupt chains owe their vendors could ultimately change the way brands approach big box retail, Allen said. It’s specialty retailers who made these big brands relevant to the broader market, and he hopes they’ll make wiser choices in the future about what companies to work with.

“The big-box multi-sports market is just too cluttered with competition,” said Philip Croley, running industry-focused business development director with Mann Group retail consultants. In what Croley calls a “race of attrition” among retailers elbowing for space, it was just a matter of time.

Independent shops, though, will always have a niche, he said. Even the veritable library of product information and reviews available online can’t truly replace customized in-person guidance.

“These next six months are the time for the industry to make a choice about what they want to be and what they want to do,” Allen said. “If they want to keep chasing these quarterly statements… that’s what got us here.”

John Connelly, president and CEO of Oboz Footwear – on the long list of vendors EMS owes – shared Allen’s sentiments that serious change is needed at the corporate level to resolve ongoing problems in the market.

“With more consolidation, there is more and more pressure on independent retailers and vendors,” he said via email. “And while those large retailers are ‘going out of business,’ they dump inventories at deep discounts and pay pennies on the dollar to vendors, all of which hurts the competitors down the street. I guess you can say some retailers don’t deserve to stay in business — if they don’t provide good service and positive shopping experiences. I believe retailers cannot afford to lose the connection with consumers in favor of bigger bottom lines.”

Management at larger companies have lost touch with the market, and allowed their finance departments to reign rather than those who are passionate about the gear, Connelly added.

“Doing business isn’t just about moving numbers to the bottom line,” he said.

The good news for the industry is that there are people who are willing to fight for change, Allen said.

“Leaders in the industry need to step up and think about what’s going to be healthy in the long term, even if it’s not comfortable in the next month,” he said. “If we don’t have people who have the courage to make those decisions, we’re actually in a lot of trouble.”

In the short term, it won’t be easy. Some independent stores may be lost, Allen said. He didn’t sugarcoat how grim the next few months will be. For those who survive, they’ll take a hit. It might mean not hiring much-needed help, not saving for college tuition or retirement, or forgoing vacation.

Protecting your business from big box promotions

Croley advises retailers to dig in hard to what’s already working for them.

“Sell what you know,” he said. “Be an expert and outfitter for your sport or community. Chains will always have an issue with this as the volume needed to turn a profit on that kind of scale requires a vast general approach.”

The best marketing dollars are spent on staff sales and leadership training, Croley said. Strong, focused branding will tie the company together and guide its direction.

“The community aspect of a specialty store is a… basic human need,” said Croley. “There’s a shared passion among people. Nothing is stronger in creating new customers in the specialty sports market.”

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